Morning Brew Daily
Capital One-Discover Mega Merger & Why Hollywood Execs Are Freaking Out
Mon, 21 Apr 2025
Episode 565: Neal and Toby talk about the Federal Reserve approving the mega merger between Capital One and Discover. Then, another big step for AI robotics, but another big flex for China in the tech arms race as they show off a humanoid robot completing its first half marathon. Also, Ryan Coogler’s ‘Sinners’ opens in theaters and there’s details about the movie deal that could upend Hollywood. Meanwhile, Home Depot’s flower business and the LA Clipper’s ‘Wall’ are the weekend’s winners. Lastly, a preview of what’s coming in the week ahead. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Pope Francis Dies at 88 2:20 - Capital One Buying Discover 6:30 - Robots Run a Half Marathon 11:00 - ‘Sinners’ Shaking Up Hollywood 17:45 - Home Depot’s Flower Business Bloomin’ 21:30 - LA Clippers’ Home-Court Advantage 24:00 - Week Ahead All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative and involves a high degree of risk. Cryptocurrency holdings are not protected by the FDIC or SIPC. APY as of 3/18/25, subject to change. *Terms and Conditions apply. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What happened following Pope Francis's death?
Big news out of Vatican City this morning. Pope Francis has died at age 88, one day after Easter Sunday.
The first pope in history from Latin America, he was Argentinian, Francis was known for bucking his predecessor's more rigid views by taking progressive stances for the Catholic Church, like advocating for the world's marginalized and poorest people, criticizing capitalism and climate change, and calling nuclear weapons and the death penalty immoral.
Francis had not been in good health this year, coming off a lengthy hospital stay for pneumonia, but he had been making several public appearances in recent weeks, including meeting Vice President J.D. Vance yesterday. So Toby, I saw a conclave, but what happens next?
No, seriously, Conclave does a pretty good job of explaining what happens. All cardinals under the age of 80 gather in the Vatican to begin the process of choosing a new pope in about two weeks. Just like in the movies, the cardinals vote in the Sistine Chapel and are kept under tight lockdown during the whole conclave with minimal outside news. They need a majority of
two-thirds to elect a new pope, so the voting can often take several rounds. Each time an unsuccessful vote takes place, they burn the ballots and kind of cause black smoke to pour from the Sistine Chapel's chimney.
But once a new pope is elected and accepts, the world finds out when the paper ballots are burned with a special chemical that makes white smoke pour from the chapel's chimney, indicating that a new religious leader has been chosen. So it could be very soon after the conclave is convened,
Or it could take a while, but it will likely be faster than the longest papal conclave in history, which lasted two years and nine months from November 1268 to September 1271, which they eventually settled when the townspeople locked the cardinals and reduced their food rations until they finally did elect a pope.
So hopefully it won't come to that, but that's generally the process that the Catholic Church is about to follow.
In the heavy metal world of credit cards, there is a new rock star in town. On Friday, regulators gave their blessing to Capital One's $35 billion acquisition of Discover, clearing the final hurdle for the formation of the new biggest credit card company in the United States. The acquisition was announced last year and was under regulatory review.
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Chapter 2: Why did the Federal Reserve approve Capital One's acquisition of Discover?
So it just adds in a little bit of extra cost savings. And you're right. When you have that little war chest now, you can start doing things like upgrading your airport lounges, which has historically been very important to a lot of credit card holders.
And you do start to compete at that higher echelon of credit card owners, the Amexes of the world, the Chase Sapphire Preferreds of the world, or Reserves of the world. And yeah, so it does look like Capital One is saying, hey, this is where the money is. We've historically catered to this group of people. Now we want to go upmarket.
It reminds me even of Spirit Airlines, who typically cater to a budget customer. They're now offering additional premium seatings in the front of their plane. So I feel like a similar sort of rebrand is happening for Capital One. And this merger kind of sets the groundwork for all of that.
So Capital One has really dominated the market for subprime, those customers who are in the credit range around 600. They've had this amazing data operation that finds an arbitrage opportunity where others have not. Their stock has increased 13% each year since it went public in 1994.
That's far better than most credit card companies besides Amex, which gets this premium because they cater to more wealthy customers. But the problem is These people who are Capital One customers are improving their credit scores and they're looking for other options.
Capital One says it has 42 million subprime customers who have improved their credit card enough to qualify for better products and pricing. And once they do qualify for those better products, they are looking elsewhere beyond Capital One. They're looking to JP Morgan. They are looking elsewhere. to American Express.
So Capital One thinks by adding Discover, by adding a payments network, by adding more customers there, unlocking all of this revenue, they can spend on airport lounges and other perks. I mean, American Express is everywhere. It gives all of these perks. You can go to a sporting event and skip the line. You can go to JFK or LaGuardia and get into a really fancy lounge.
Capital One thinks that by improving those capabilities, it can keep those customers with it over the course of their credit building journey.
And then the final aspect is that this deal definitely encourages, you know, the financial services industry who, when Trump was elected, thought they'd see an uptick in mergers and acquisitions. So this deal, everyone was kind of weighted with bated breath, seeing how it would transpire, would it actually be approved or not.
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Chapter 3: How did humanoid robots perform in a recent half marathon in China?
This has been around for five years at this point. So basically what this was was more of a hardware endurance example, showing that the joints can withstand two hours plus of pounding. Because nearly three hours is a lot of pounding. I've run marathons before. It hurts your joints, hurts your knees.
So maybe it wasn't as as big of like the brains of the robot, but it was maybe the brawn of the robot that was on display.
Yeah. Maybe it was more like a motorsport, like designing a F1 vehicle for these for these robots to run instead of, you know. Yeah. Instead of like a road race, it was more of a of a motor race. But certainly this rivalry is heating up and the companies in the West are dying. you know, pursuing robotics.
I mean, Tesla, Elon Musk says that his Optimus robot will be a $10 trillion unit one day as part of Tesla. They've completely reframed their company in that regard. Meta started a new team under its Reality Labs division earlier this year. to produce humanoid robots.
NVIDIA, Jensen Huang, the CEO, said at his keynote speech at CES this January, just a few months ago, that the chat GPT moment for general robotics is just around the corner. Amazon, Apple, Google are also making humanoid robots. Jensen says that they're going to come to factories near you within a few years. So this is the next frontier.
This is possibly the next frontier in this tech rivalry between U.S. and China.
Well, someone finally did it. Sinners, the Jim Crow era drama thriller survival horror mashup written and directed by Ryan Coogler starring Michael B. Jordan as twin bootleggers turned juke joint owners battling river dancing vampires finally kicked the Minecraft movie out of the top spot at the box office.
Audiences are digging it with the movie bringing in over $45 million at the North American box office this past weekend, the biggest debut for an original film since Jordan Peele's Us in 2019. And critics really love it. It currently has a 98% Rotten Tomatoes rating from 223 critics, which when you combine that with its audience rating means it's tied with the godfather on the site.
But here's the issue. Sinners has to be not just a success, but a smashing one. One, because it costs a lot, around $150 million to make in market. And two, Warner Bros. struck a very unique deal with Ryan Coogler.
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Chapter 4: What makes Ryan Coogler's 'Sinners' movie deal disruptive to Hollywood?
Chapter 5: How is Home Depot's flower business performing and why?
Chapter 6: What is the significance of the LA Clippers' 'Wall' for their home-court advantage?
Chapter 7: What can we expect in the week ahead in business and tech news?
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, humanoid robots ran a half marathon in China. They're already taking our jobs. They're going to take our hobbies too.
Then Hollywood studio execs are freaking out over a deal Ryan Coogler cut for his new movie Sinners. It's Monday, April 21st. Let's ride.
Big news out of Vatican City this morning. Pope Francis has died at age 88, one day after Easter Sunday.
The first pope in history from Latin America, he was Argentinian, Francis was known for bucking his predecessor's more rigid views by taking progressive stances for the Catholic Church, like advocating for the world's marginalized and poorest people, criticizing capitalism and climate change, and calling nuclear weapons and the death penalty immoral.
Francis had not been in good health this year, coming off a lengthy hospital stay for pneumonia, but he had been making several public appearances in recent weeks, including meeting Vice President J.D. Vance yesterday. So Toby, I saw a conclave, but what happens next?
No, seriously, Conclave does a pretty good job of explaining what happens. All cardinals under the age of 80 gather in the Vatican to begin the process of choosing a new pope in about two weeks. Just like in the movies, the cardinals vote in the Sistine Chapel and are kept under tight lockdown during the whole conclave with minimal outside news. They need a majority of
two-thirds to elect a new pope, so the voting can often take several rounds. Each time an unsuccessful vote takes place, they burn the ballots and kind of cause black smoke to pour from the Sistine Chapel's chimney.
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